Strategic Participation of Merchant Energy Storage in Joint Energy-Reserve and Balancing Markets

Abstract

Energy storage systems (ESS) may provide the required flexibility to cost-effectively integrate stochastic electricity generation from renewable energy sources. Energy storage owners should, however, be properly renumerated for the services they provide. In this paper, we propose a bilevel optimization problem, mimicking the strategic behavior of a price-making ESS owner in a joint day-ahead (DA) energy-reserve market. We explicitly consider possible real-time balancing market outcomes when clearing the DA markets via probabilistic reserve constraints and ensure the feasibility of dispatching ESS-based reserves through novel worst-case reserve activation constraints. The proposed framework may be used by regulators and market operators to assess market design options or by ESS owners to optimize their bids.

Sizing of underwater gravity storage with solid weights participating in electricity markets

“…In the current energy mix, most of the reserve is delivered by conventional power plants which have high marginal costs compared to the UGES technology. Consequently, the price of reserve activation far exceeds the UGES operating costs, thereby providing a significant margin of profit to UGES units 25,26 (in addition to the profit leveraged from the offered capacity). In this paper, we assume that only upward reserve is provided by UGES since downward reserve can usually be more efficiently provided by rival conventional power plants due to their substantial cost savings (mainly arising from the fuel that has not been used 26‐28 ).…”

“…Consequently, the price of reserve activation far exceeds the UGES operating costs, thereby providing a significant margin of profit to UGES units 25,26 (in addition to the profit leveraged from the offered capacity). In this paper, we assume that only upward reserve is provided by UGES since downward reserve can usually be more efficiently provided by rival conventional power plants due to their substantial cost savings (mainly arising from the fuel that has not been used 26‐28 ). It should be noted that this assumption is strongly dependent on the market conditions (ie, the prices in the different market floors and the generation mix of the studied area), but it is adequate for the Belgian case study considered in this work.…”

Managing Risks Faced by Strategic Battery Storage in Joint Energy-Reserve Markets

“…Indeed, if not properly accounted for, the real-time activation of ESS-based reserves may lead to violations of the ESS' state-of-energy constraints. Whereas Nasrolahpour et al [9] account for the expected, average impact of reserve activation on the state-of-energy, Schillemans et al [10] ensure that the worst-case real-time state-of-energy respects the capacity limits of the ESS. In this paper, we will follow the last approach.…”

“…Contrary to [9], the proposed model (i) explicitly represents the propagation in price formation from the balancing market to the day-ahead energy market; (ii) ensures that the activation of scheduled BES-based reserves is feasible even if all reserves are consecutively activated in the upward and/or downward direction by enforcing worstcase reserve activation constraints, and (iii) does not require a binary expansion approximation if one considers a risk-neutral BES owner (see Section II-C). Compared to [10], we employ a scenario-based representation of the balancing market. This allows accounting for inter-temporal links between balancing prices, introduced by the BES, and an accurate representation of the state-of-energy and value of stored energy in each balancing market scenario.…”

“…Furthermore, we consider (i) transmission constraints in our market clearing model, which may influence the dispatch, reserve procurement and deployment, hence, providing an opportunity for the BES owner to exercise market power [4]; (ii) the CVaR, which allows balancing the expected profits and risk; and (iii) a detailed BES model suited for lithium-ion batteries in order to accurately capture the charging capabilities of these systems [19]. None of these features are considered in [9], [10], but may have a significant impact on the BES' profitability.…”